![[Articles of Association] Understanding the 6 key uses of the Articles of Association (AA) | Procedures for amending the Articles of Association](https://www.genacct.com/wp-content/uploads/2023/12/將軍會計OG圖-1024-x-685-像素-2.jpg)
Is the Articles of Association important? The answer is: very important. With over 20 years of experience in company incorporation services, we have found that many entrepreneurs overlook the content and key points of the Articles of Association, assuming it is merely one of the company registration documents . In fact, even after company registration is completed, there are many occasions where the Articles of Association is still required. This article shares the main uses of the Articles of Association and helps you clearly understand its six key purposes.
What is the Articles of Association?
Why must a limited company have Articles of Association?
The full name of the Articles of Association is the Articles of Association of a private company limited by shares (Article and Association). It is a set of internal operating rules established by the founding members in accordance with Hong Kong company law before company registration.
As a limited company is a separate legal entity, it must have Articles of Association as the basis for its operations. For example, if you wish tobuy or sell property under a limited company, the Articles of Association will specify how many shareholders and directors must attend a meeting for a resolution to be passed.
Further reading: Benefits of setting up a company
Customised Articles of Association
Or use the template Articles of Association provided by the Companies Registry?
Most SMEs adopt the Companies Registry’s Model Articles (Template A – simplified format). However, in certain cases, the founding members may customise the content of the Articles of Association due to specific requirements. Please note that the provisions and objects must not conflict with the Companies Ordinance. We recommend that entrepreneurs engage professionals—such as solicitors familiar with commercial and company law—to draft customised Articles of Association.
Further reading: Process for setting up a limited company
Main uses of the Articles of Association:
1. Opening a corporate bank account
One of the required documents for opening a corporate bank account is the Articles of Association, as the bank needs to clearly understand the company’s operating rules, the powers of directors and shareholders, and the statutory quorum for meetings.2. Signing a tenancy agreement or contract
When signing a tenancy agreement or contract in the name of a limited company, the solicitor or estate agent will first verify how many directors must sign for it to be valid, and how many people must attend a meeting to pass the relevant resolution.
3. Buying and selling assets in the name of a limited company
When buying or selling buildings, vehicles, land, etc. in the name of a limited company, solicitors will always review the Articles of Association before signing the sale and purchase agreement to confirm that the company is permitted to hold assets and whether the Articles specify the procedures for such transactions.Further reading: Buying property via a shell company | 5 key benefits of buying property via a ready-made company
4. Share transfer
If a shareholder needs to transfer shares, in addition to the share transfer agreement, the Articles of Association must be submitted to the Inland Revenue Department for stamp duty, and the Articles generally set out the conditions for share transfers.
Further reading: Share transfer stamp duty calculation | Share transfer procedures, methods, required documents and fees
5. Company audit and tax filing
For each audit, a limited company should provide the latest Articles of Association to the responsible practising accountant (CPA). In addition, when submitting the first Profits Tax Return, the Articles of Association must be submitted together to the Inland Revenue Department.6. Adding or removing directors or shareholders
Before a share transfer or a director’s resignation, it is essential to confirm the quorum requirements for board meetings and general meetings.
Real case: We once handled a case where a company originally had two directors and shareholders. After one director/shareholder exited the company and the resignation and share transfer were completed, the company went to the bank to update the signing mandate, only to discover that the Articles of Association required a minimum quorum of two persons for both board meetings and general meetings. With only one director/shareholder remaining, it was impossible to convene a board meeting or general meeting, meaning the company could not operate. As a result, the bank rejected the application to change the signing mandate.
Can the content of the Articles of Association be amended?
How long does it take to amend the Articles of Association?
A limited company may pass a special resolution to amend the Articles of Association. However, please note the original Articles’ provisions on the amendment procedures and the required number of members for a special resolution. The Companies Registry generally takes around 10 working days to process an application to amend the Articles of Association. For more complex cases, the processing time may take 1 to 2 months.
Procedures for amending the Articles of Association:
1. Initial consultation: Contact General Accounting. Our account manager will understand the reasons for the amendment and provide feasible options and a quotation.
2. Drafting the Articles: Provide the new Articles of Association for the client’s review and confirmation.
3. Provide documents: The client provides the original Articles of Association, the latest Annual Return, the Business Registration Certificate, and identity and address proof documents of the company’s directors and shareholders.
4. Prepare documents: General Accounting will prepare the Special Resolution, the Notice of Alteration of Articles (NAA1), and the new Articles of Association (Article and Association).
5. Sign documents: The client visits General Accounting in person for identity verification and to sign the documents for amending the Articles of Association.
6. Submit documents: General Accounting will submit the relevant documents to the Companies Registry.
7. Compile the new Articles. Upon completion, prepare 5–10 copies of the new Articles of Association (commonly known as a booklet) and notify the bank, company secretary firm, practising accountant, and other institutions with the Special Resolution.
Summary:
Based on our years of company registration experience, it is rare for a company’s failure to be caused by the Articles of Association. However, after successful incorporation, errors in the Articles of Association may lead to issues when opening a corporate bank account, or prevent directors from signing tenancy agreements or contracts in the company’s name due to conflicts between the Articles and actual operational requirements.
We recommend that aspiring entrepreneurs consult a professional company secretarial firm before incorporation to avoid unnecessary losses.
Further Reading:
